[Jack]

You could say the same about Amazon for most of its history.

I do rather enjoy the share holders supporting the discounts on my purchasing ;P

 

[gzoom]

I just thought people must be bored of all the doom and gloom stories by now - because they are essenitally the same circular argument, just replace the letter 3 with X or S, and infuture Y.

Instead can I say am really looking fowards to the 3 - when ever ours arrive. Virtually the same rear passenger space as a bench seat in a 5/7 seater X despite been alot smaller inside. Looks like one practical family car too me .

 

[Simon Mac]

@cah197 Amazon and Tesla are wildly different.

Setting aside cash flow and self funding, you only have to look at the recurring revenue stats.

Tesla may be lucky and sell the same owner a car on average every 3 years. Amazon can count on subscription revenues almost guaranteeing their customer base buys month in month out, and even those who don't subscribe to some form of service are hugely likely to be repeat customers multiple times per year. Give such vast numbers of transactions it's statistically predictable with large confidence what future revenue will be.

Sorry I just don't see any similarities in the business model. (I might if Tesla could monetise charging, servicing or connectivity subscriptions.)

 

[cah197]

I do rather enjoy the share holders supporting the discounts on my purchasing ;P

I think you’ll find it’s all the P100D owners who subsidise your purchase.

 

[Simon Mac]

I think you’ll find it’s all the P100D owners who subsidise your purchase.

Them and tax payers.

For all the gross margin in a Tesla, at least here in the UK, it was more than offset by tax savings.

I'm as guilty as the next person for taking advantage of the situation, but I know I saved more than 30% of the list price via BIK savings against a comparably priced ICE car.

 

[arg]

Sorry I just don't see any similarities in the business model. (I might if Tesla could monetise charging, servicing or connectivity subscriptions.)

Their detailed business models of their various businesses are undoubtedly different, but I think the comparison being drawn is that Amazon and their investors have been happy to forgo the possisbility of building a stable, profitable business of modest size in favour of repeatedly doubling-down on their bets to build an ever bigger conglomerate dominating multiple markets - "growth is more important than profit".

Of course, the dotcom boom provided plenty of examples of how this can lead to spectacular failure.

Although I think the comparison is fairly clear, I'm not sure what conclusion that helps with, other than that Tesla is likely to be either a spectacular failure or continue as they are (I haven't studied Amazon's recent financials, but my understanding is that they are still going for growth rather than profit, 20+ years on).

 

[gzoom]

Them and tax payers.

For all the gross margin in a Tesla, at least here in the UK, it was more than offset by tax savings.

I'm as guilty as the next person for taking advantage of the situation, but I know I saved more than 30% of the list price via BIK savings against a comparably priced ICE car.

Less BIK talk....some of us still have no idea what that means!!!

I'll consol my self with the knowledge that my employer is apparently contributing 13% of taxable pay into my pension pot every month.....though personally I think the chance of the UK government goving bankrupt is probably higher than Tesla .

 

[donald]

I just thought people must be bored of all the doom and gloom stories by now - because they are essenitally the same circular argument, just replace the letter 3 with X or S, and infuture Y.

On the contrary, this is the single most critical moment for Tesla which they have not experienced previously.

It is a unique step for Tesla which will either make or break them.

They have now to ramp up to mass production, to deliver a quality product at a budget price.

If you think that is a trivial step further than hand-making expensive niche cars that are fat with profit margin, then you don't really have a grasp on the commercial significance of that.

If they make a product with a single major defect involving a mass recall, it could wipe out their entire profit margin and damage their reputation, possibly bankrupting them.

They have to now do what traditional manufacturers do, set up the lines, lock down their processes and those of their suppliers, and make darned sure there aren't any major defects either in the design or introduced along production, keeping tight reign on their production 'control limits'.

 

[Edd Beesley]

On the contrary, this is the single most critical moment for Tesla which they have not experienced previously.

It is a unique step for Tesla which will either make or break them.

They have now to ramp up to mass production, to deliver a quality product at a budget price.

If you think that is a trivial step further than hand-making expensive niche cars that are fat with profit margin, then you don't really have a grasp on the commercial significance of that.

If they make a product with a single major defect involving a mass recall, it could wipe out their entire profit margin and damage their reputation, possibly bankrupting them.

They have to now do what traditional manufacturers do, set up the lines, lock down their processes and those of their suppliers, and make darned sure there aren't any major defects either in the design or introduced along production, keeping tight reign on their production 'control limits'.

What is the purpose of Tesla?

Is it to make money?

I don’t think it is.

 

[cah197]

On the contrary, this is the single most critical moment for Tesla which they have not experienced previously.

It is a unique step for Tesla which will either make or break them.

They have now to ramp up to mass production, to deliver a quality product at a budget price.

If you think that is a trivial step further than hand-making expensive niche cars that are fat with profit margin, then you don't really have a grasp on the commercial significance of that.

If they make a product with a single major defect involving a mass recall, it could wipe out their entire profit margin and damage their reputation, possibly bankrupting them.

They have to now do what traditional manufacturers do, set up the lines, lock down their processes and those of their suppliers, and make darned sure there aren't any major defects either in the design or introduced along production, keeping tight reign on their production 'control limits'.

They’re currently mass producing the S and X vehicles, so applying the same process to the Model 3 line is a matter of when not if.

Early production may be slow, but I suspect it’s precisely to iron out all the issues before they ramp up so they don’t have too many nasty recalls.

We’ve learnt to take all the forecast dates with a pinch of salt, but as we’ve seen with the X ramp up, once thet get going there’s no stopping them.

Oh, and who said the 3 was a low margin vehicle?

 

[gzoom]

Our X is probably one of the most complex mass produced cars on the road. Can anyone else think of a car with powered front doors, powered gull wing doors, AP hardware, massive windscree, powered 2nd row seats? I don't see Mercedes/BMW etc offering anything remotly close let alone electric powered.

Despite all the doom sayers ive yet to actually read about one actually suffering a failure of the doors.

The Model 3 is infinitely simpler to excute, and as @Edd Beesley points out Teslas continued success is 100% crucial to EV adoption. I for one is happy to put my money into Tesla products and will continue to do so untill the day EVs become turly mass market.

Driving home today I saw exactly 0 EVs, and probably over 100 combustion cars. The future of EVs is far from secure, I cannot understand how any who actually want EVs to succeed want Tesla to fail.

 

[Zebra1922]

Their detailed business models of their various businesses are undoubtedly different, but I think the comparison being drawn is that Amazon and their investors have been happy to forgo the possisbility of building a stable, profitable business of modest size in favour of repeatedly doubling-down on their bets to build an ever bigger conglomerate dominating multiple markets - "growth is more important than profit".

Of course, the dotcom boom provided plenty of examples of how this can lead to spectacular failure.

Although I think the comparison is fairly clear, I'm not sure what conclusion that helps with, other than that Tesla is likely to be either a spectacular failure or continue as they are (I haven't studied Amazon's recent financials, but my understanding is that they are still going for growth rather than profit, 20+ years on).

I understand your argument, but the issue for Tesla is the rate of cash burn. Yes Amazon burnt through cash, but nowhere near at the same rate as Tesla versus revenues.

Tesla have done brilliantly so far raising money in the markets to fund the rapid expansion, but there is only so long this can go on for. If they get significant (and I mean at least 6 figures) of Model 3 to market next year then they might have enough cashflow to survive as investors will see a success and may be willing to pump in more cash. Significant problems with the production ramp up will lead to the death of the company as it runs out of cash (a classic case of over trading).

 

[donald]

A few 10's of thousand of vehicles is called 'serial production' in the industry. It is too small a volume for most 1st tier suppliers to even bother developing product for, because the volumes needed to make competitive automotive components is usually a few million.

Moving to 10,000 a week is not simply 'a bit more, like model S'.

Hey, no-one's knocking Musk for having a go, and good luck to him. But they need to start making profit soon, and using validation fixtures to make stuff on isn't a path to that conclusion. I hope more time on those jigs helps them iron out more issues than going straight to the high volume line, so maybe it might even be a good thing. Maybe even it was the intention.

 

[JWilde]

What if his intention was never to make a profit just to make EVs happen? And he will just keep going as long as he can?

Musk does not really strike me as a man who is interested in making money, he has had more money than he could ever personally need since his bizarre early software success (not to mention his family is also rather wealthy).

If people do eventually figure this out and the investment dries up well by then the rest of the world is going to be far enough along with EVs for it not to matter.

 

[Edd Beesley]

What if his intention was never to make a profit just to make EVs happen? And he will just keep going as long as he can?

Musk does not really strike me as a man who is interested in making money, he has had more money than he could ever personally need since his bizarre early software success (not to mention his family is also rather wealthy).

If people do eventually figure this out and the investment dries up well by then the rest of the world is going to be far enough along with EVs for it not to matter.

Exactly. Every quarter of Ford trying to build a “Tesla killer” is a good quarter.

 

[Simon Mac]

What is the purpose of Tesla?

Is it to make money?

I don’t think it is.

Depends on "who" is making the money.

Plenty of Elon's relatives are rich beyond most of our wildest dreams on the back of serially money losing enterprises.

If, as many portray Tesla, the idea is to save the planet, then it should have been set up as a charity/ NFP from day one.

 

[ASM]

I think the Tesla view is that a large part of the global energy economy will shift from burning carbon to consuming electricity generated by renewables.

There are are a number of areas in the emerging renewable economy that offer companies the opportunity to build profitable businesses:
- renewable generation infrastructure
- large scale production of batteries
- storing excess renewable generation (energy trading, buy when cheap and sell when expensive)
- electric vehicles
- electric vehicle charging infrastructure

Tesla have “skin in the game” in all of these. It’s nice for Tesla to be able to say that they are working in an area that is seen as environmentally friendly but really they are just trying to be a first mover in an inevitable change.

Although the change is inevitable, it requires enormous capital expenditure which rules out any type of charitable organisation. Only limited liability companies have the ability to drive this type of economic activity.

 

[pbceng]

I agree with the comments about Tesla being in a critical phase and burning cash at a hell of a rate to get the Model 3 into production. I don't however regard the Daily Kanban as a reliable source of information on progress though - if I remember correctly that's where the Tesla Deathwatch came from along with predictions the Model S would never be made apart from a few hand-built prototypes.

Tesla may well fail - the history of companies challenging the incumbent auto industry gives plenty of evidence to suggest it - but I think the likelihood is lower than it's ever been before. They may over promise but they do have a history of delivering and I honestly think the Model S is the best car I've ever experienced in lots of ways. I've no real experience of the Model X but everyone I've spoken to with one is over the moon with it so I'll defer to @gzoom's viewpoint there.

 

[donald]

What if his intention was never to make a profit just to make EVs happen? And he will just keep going as long as he can?

Then the Model 3 would seem to be an unnecessary stretch too far.

You can only make competitive product by making it in such bulk that the slim profits on each car add up to a decent return. It would make more sense to improve the S and cut out costs over time to achieve that outcome. Productionising for 'a million a year' levels would be a mad step if 'zero profit' and 'disrupt the market' were the objectives.

 

[6652]

I don’t think anybody who shares some concern about the future of Tesla wants them to fail, at least that isn’t what I’m reading.

I think the main risk for Tesla right now is that Mr Musk gets bored with the whole thing before the M3 is up and running, and before investors get their money back.

Now, when is this trip to Mars, and will it be a Tesla production rocket or a hand built prototype?

Is the reason for the Tesla EV business really to off set emissions from space travel?!